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The Fed Minutes Freakout

For Fed watchers out there, today is one of the good days.  Already, we have seen NY Fed President William Dudley make headlines when he said that it will take another three or four months before Fed policymakers will know whether or not the economy is on firm enough footing to start easing on stimulus.  At 10 am, Fed Chairman Ben Bernanke will be testifying in front of a Congressional Committee on the Fed's outlook for the economy.  If that's not enough to tide you over, at 2PM we will get the release of the FOMC minutes from the 4/30-5/1 meeting.

So far in 2013, days where the Fed has released the minutes from a prior meeting have not exactly been positive for the market.  The charts below show the intraday trading of the S&P 500 on each of the days where the FOMC released the minutes from a meeting.  In each chart, the red dot indicates the time when the Minutes were released (2PM).  

On January 3rd, the S&P 500 erased a modest gain for the day and declined 0.38% in the last two hours of trading day.  On February 2nd, the S&P 500 was already down for the day, but it fell an additional 0.72% in the last two hours of trading.  Finally, on April 10th, the S&P 500 was up more than 1% when the minutes were released, and while the S&P 500 didn't decline, the rally was stopped dead in its tracks.

In each instance, the reason for the skittishness in the equity market was related to concerns that the Fed was going to taper its bond buying program at some point in the near future.  With the benefit of hindsight, though, each of those instances of concern were overblown.